Amazon turning to fresh crop of merchants for selling popular products on its online platform

Amazon will be reducing its dependence on its largest merchant Cloudtail, which is owned by a joint venture between Amazon Asia and NR Narayana Murthy.Writankar Mukherjee&Madhav Chanchani | ET Bureau | July 13, 2016, 08:07 IST

The change of sellers in smartphones is significant as it accounts for the largest share of sales for top online retailers, according to experts tracking the space.KOLKATA | BENGALURU: Amazon is turning to a fresh crop of merchants who will sell the most popular products on its online platform, as the American company takes measures to comply with government regulations which limit sales from any single merchant at 25% of the total.

In doing so, Amazon will be reducing its dependence on its largest merchant Cloudtail, which is owned by a joint venture between Amazon Asia and Infosys cofounder NR Narayana Murthy’s personal investment vehicle Catamaran, executives aware of the plan said. In April, the government announced new regulations for ecommerce companies, and one of the main stipulations was the limit it put on sellers’ contribution to turnover of online marketplaces.Although online retailers say they comply with existing rules and own no inventory, they have merchants (WS Retail for Flipkart, Cloudtail for Amazon) that account for a substantial chunk of their sales. On Monday, Mint reported that Flipkart has identified four new sellers to reduce dependence on WS Retail.

Over the past few months, Amazon has been relying on the new set of sellers to retail its best-selling brands such as smartphones from Samsung and Motorola that are sold exclusively on its platform.

Cart2India Online, Amiable Electronics, Apptronics Retail, E-Mobiles, Okay Enterprises, GreenMobiles and S&S Company are the entities which have emerged as the primary sellers of Amazon-exclusive smartphones.

So far, Cloudtail was the main seller of phones sold exclusively on Amazon. Amazon did not directly address questions about diversifying beyond Cloudtail.

“With over 65 million products and 100,000 sellers, we will continue to provide a platform that enables a large number of independent sellers take advantage of it and also benefit from our pan-India logistics network,” a spokeswoman said. Cloudtail did not reply to emails seeking comment.

The move to engage with more seller entities comes before the start of the crucial festive season, as Amazon looks to pull ahead of market leader Flipkart. Jeff Bezos, chief executive officer of the Seattle-based giant, last month announced plans to increase investments in India from $2 billion to $5 billion.

While Amazon said it grew shipments by 150% in first quarter of the calendar year, Flipkart has not disclosed its sales numbers for 2016, saying customer satisfaction is its key metric now.

MULTIPLE SELLERS “Amazon has indicated, though not in writing, that there will be multiple sellers for online-exclusive models instead of just one seller,” said a senior executive at one of the phone companies which sells its products in exclusive tie-ups with Amazon.

In such deals, brands partner with Amazon Wholesale India Pvt Ltd, an affiliate of Amazon.com Inc. Amazon Wholesale distributes the product to sellers who would sell through the marketplace. While previously Cloudtail was the seller for Amazon-exclusive products, now Amazon Wholesale is passing on products to other sellers.

Already, new exclusive launches at Amazon are not being channelled through Cloudtail. For instance, Motorola’s latest model Moto G Plus 4th generation is sold by five sellers at Amazon — GreenMobiles, Amiable Electronics, Apptronics Retail, EMobiles, Okay Enterprises and S&S Company. Similarly, the Coolpad Note 3 Plus & Lite smartphones are sold by E-Mobiles and GreenMobiles.

SIGNIFICANT MOVE The change of sellers in smartphones is significant as it accounts for the largest share of sales for top online retailers, according to experts tracking the space.

“For the Indian online retailing industry, smartphones and tablets account for 45-50% of sales while around 20% comes from fashion. We expect Amazon, along with Flipkart and Snapdeal, to fall in this bracket of sales split as well,” said Mrigank Gutgutia, engagement manager at consumer Internet research firm RedSeer. About 30-50% of smartphone sales for large online marketplaces are generated through exclusive tie-ups, he said. While Cloudtail remains the largest seller for Amazon India, the new merchants are now among the top 20 for Amazon.

(With inputs from Payal Ganguly in Bengaluru)

RELATED

17 charts that show just how vast Amazon's $275 billion business really is